6 ms·

Perhaps this is philosophical, but how much actual “wealth” was created by humans in the past two years? Yes, assets values went up, but how much if any of the

by calr 4y ago

Perhaps this is philosophical, but how much actual “wealth” was created by humans in the past two years? Yes, assets values went up, but how much if any of the that growth was “real” vs inflationary? Did businesses get that much more efficient, did we invent new technologies to improve our standard of life? If the wealth captured isn’t real, meaning it can’t be realized in any normal sense (outside of big numbers on a screen) does it matter?

adam_arthur 4y ago
Real GDP per capita is a better indicator of "economic wealth" than valuation. Asset values swing most wildly on the basis of the risk free rate, which is where most of the new "wealth" created since 2020 has come from (ZIRP, QE etc). It is somewhat illusory in that low rates must be sustainable to support elevated valuations. Obviously we're seeing the other side of that with rates having risen due to inflationary pressures. e.g. look at how much "wealth" Japan had in the 1980's before their economy imploded. The imperial palace was perceived to be worth more than all of California, something like that. https://en.wikipedia.org/wiki/Japanese_asset_price_bubble https://en.wikipedia.org/wiki/Japanese_asset_price_bubble
Shared404 4y ago
> If the wealth captured isn’t real, meaning it can’t be realized in any normal sense (outside of big numbers on a screen) does it matter? I would argue yes. Not because there's more wealth, but because it means that a greater percentage of the existing wealth is going to the largest 1%.
- calr 4y ago
  I think I see what your saying. Wealth creation is dilutive on a relative basis, meaning in 2019 the lower/middle class had X% of the total wealth. By “creating” a bunch of new wealth the denominator grows and on a relative basis the middle/lower class becomes less wealthy.
  - Shared404 4y ago
    That is both what I meant, and a better method of phrasing it. Thanks!
rgbrenner 4y ago
Yes, because those "numbers on a screen" are called dollars.. and we price everything using those numbers. So if the numbers get bigger, people will want more of them when you buy things, including things you need to live like food and shelter.
- Jensson 4y ago
  > Musk, for example, has pulled $40b out through Tesla stock sales in the past couple of years. Those are real assets. Then your future salaries are also real assets, and should be counted for your net worth. The same argument applies, you can take out loans against your future earnings and spend it, so it is a part of your current net worth, right? You say that maybe you get into an accident so you can't work? Same logic applies to stocks, something might happen and nobody wants to pay for them anymore rendering them useless. So to make the comparison fair you have to be consistent. Either future earnings are assets, or they aren't, otherwise the comparison isn't meaningful.
  - sokoloff 4y ago
    You’d have to decrement by projected future expenses and discount for uncertainty (just as we value stocks on future free cash flows [not revenues], and discount for uncertainty).
tshaddox 4y ago
I’m not sure how much that matters when we’re talking about wealth distribution, since the dollars are fungible regardless of how “real” they are. It’s not like the middle class people’s new wealth is somehow any more real than the wealth of the richest 1%.
- rish1_2 4y ago
  This sounds about right
anm89 4y ago
Basically the number you are looking for is global real GDP growth. This also misses the mark in many ways but it's the closest easy proxy for what you want. So just take global real gdp growth and figure out the ratio that went to the 1% . Note, life could become worse for almost everyone, while real wealth is created. I would argue that's pretty much what is happening. It doesn't mean real resources weren't created or extracted and someone owns those things. The idea of altering these figures to account for happiness or quality of life is a fallacy in my opinion. GDP should be measured the way it is. Decmocracies need to figure out their own definitions of "happiness" or whatever you want to call it and optimize for those parameters. But there is no combined measure that covers both.
klyrs 4y ago
Regardless of how "real" the wealth is, my property value went up, and with it, my tax bill. In the same time period, household total income went down. Property values rise because the richest among us can make money flipping houses. I'm getting poorer because the roof over my head is a financial plaything. Technically, I could sell my house and profit, but I need a house and in terms of what I can afford, the entire market has moved too so my quality of life would diminish.
- klipklop 4y ago
  Imagine how the folks feel that have been perma-priced out due to real estate speculation and near-zero interest rates raging on for years.
  - klyrs 4y ago
    No need to imagine; I thought I was going to spend the rest of my life renting illegal moldy basement apartments until about 4 years ago.
    - klipklop 4y ago
      Congrats for getting out of that trap. Now for the next one. Pay off the mortgage. In my opinion you are not "free" until some bank or landlord cant take your housing away from you.
      - klyrs 4y ago
        Indeed. Those "near-zero" interest rates you mentioned? They don't last. We could only lock in a 5-year rate -- the rates that come after that loom large in our awareness.
      - sokoloff 4y ago
        Property tax is forever. Your city/county will still take your paid-off house if you don’t pay property taxes for long enough.
- 4y ago

by calr 4y ago

adam_arthur 4y ago

Real GDP per capita is a better indicator of "economic wealth" than valuation. Asset values swing most wildly on the basis of the risk free rate, which is where most of the new "wealth" created since 2020 has come from (ZIRP, QE etc). It is somewhat illusory in that low rates must be sustainable to support elevated valuations. Obviously we're seeing the other side of that with rates having risen due to inflationary pressures. e.g. look at how much "wealth" Japan had in the 1980's before their economy imploded. The imperial palace was perceived to be worth more than all of California, something like that. https://en.wikipedia.org/wiki/Japanese_asset_price_bubble https://en.wikipedia.org/wiki/Japanese_asset_price_bubble

Shared404 4y ago

> If the wealth captured isn’t real, meaning it can’t be realized in any normal sense (outside of big numbers on a screen) does it matter? I would argue yes. Not because there's more wealth, but because it means that a greater percentage of the existing wealth is going to the largest 1%.

calr 4y ago
I think I see what your saying. Wealth creation is dilutive on a relative basis, meaning in 2019 the lower/middle class had X% of the total wealth. By “creating” a bunch of new wealth the denominator grows and on a relative basis the middle/lower class becomes less wealthy.
- Shared404 4y ago
  That is both what I meant, and a better method of phrasing it. Thanks!

rgbrenner 4y ago

Yes, because those "numbers on a screen" are called dollars.. and we price everything using those numbers. So if the numbers get bigger, people will want more of them when you buy things, including things you need to live like food and shelter.

Jensson 4y ago
> Musk, for example, has pulled $40b out through Tesla stock sales in the past couple of years. Those are real assets. Then your future salaries are also real assets, and should be counted for your net worth. The same argument applies, you can take out loans against your future earnings and spend it, so it is a part of your current net worth, right? You say that maybe you get into an accident so you can't work? Same logic applies to stocks, something might happen and nobody wants to pay for them anymore rendering them useless. So to make the comparison fair you have to be consistent. Either future earnings are assets, or they aren't, otherwise the comparison isn't meaningful.
- sokoloff 4y ago
  You’d have to decrement by projected future expenses and discount for uncertainty (just as we value stocks on future free cash flows [not revenues], and discount for uncertainty).

tshaddox 4y ago

I’m not sure how much that matters when we’re talking about wealth distribution, since the dollars are fungible regardless of how “real” they are. It’s not like the middle class people’s new wealth is somehow any more real than the wealth of the richest 1%.

rish1_2 4y ago
This sounds about right

anm89 4y ago

Basically the number you are looking for is global real GDP growth. This also misses the mark in many ways but it's the closest easy proxy for what you want. So just take global real gdp growth and figure out the ratio that went to the 1% . Note, life could become worse for almost everyone, while real wealth is created. I would argue that's pretty much what is happening. It doesn't mean real resources weren't created or extracted and someone owns those things. The idea of altering these figures to account for happiness or quality of life is a fallacy in my opinion. GDP should be measured the way it is. Decmocracies need to figure out their own definitions of "happiness" or whatever you want to call it and optimize for those parameters. But there is no combined measure that covers both.

klyrs 4y ago

Regardless of how "real" the wealth is, my property value went up, and with it, my tax bill. In the same time period, household total income went down. Property values rise because the richest among us can make money flipping houses. I'm getting poorer because the roof over my head is a financial plaything. Technically, I could sell my house and profit, but I need a house and in terms of what I can afford, the entire market has moved too so my quality of life would diminish.

klipklop 4y ago
Imagine how the folks feel that have been perma-priced out due to real estate speculation and near-zero interest rates raging on for years.
- klyrs 4y ago
  No need to imagine; I thought I was going to spend the rest of my life renting illegal moldy basement apartments until about 4 years ago.
  - klipklop 4y ago
    Congrats for getting out of that trap. Now for the next one. Pay off the mortgage. In my opinion you are not "free" until some bank or landlord cant take your housing away from you.
    - klyrs 4y ago
      Indeed. Those "near-zero" interest rates you mentioned? They don't last. We could only lock in a 5-year rate -- the rates that come after that loom large in our awareness.
    - sokoloff 4y ago
      Property tax is forever. Your city/county will still take your paid-off house if you don’t pay property taxes for long enough.
4y ago